Skip to Content
Rekenthaler Report

How to Lose a Lawsuit

Accuse a fund company of overcharging.

Mentioned: ,

Man vs. MetWest
In October 2015, one Thomas Kennis sued MetWest in the U.S. District Court of Central California for the company’s oversight of Metropolitan West Total Return Bond (MWTIX). Kennis’ lawyers alleged that MetWest’s rent was too damn high. “Defendant breached [its] fiduciary duty by receiving investment advisory fees from the Fund that are so disproportionately large that they bear no reasonable relationship to the value of the services provided by the Defendant.”

The plaintiff’s complaint: When MetWest Asset Management worked for other mutual fund companies as a subadvisor, it earned a maximum of 20 basis points per year. (One contract ran as low as 5 basis points, at the final breakpoint.) But when running money for its own organization, with MetWest Total Return Bond, it was paid 35 basis points, even though MetWest Total Return Bond was by far its largest account. Forget volume discounts; this was a volume premium.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.